School of Graduate Studies

Central Philippine University

Jaro, Iloilo City

Comparative Financial Reports of San Miguel Brewery Inc. and Emperador Inc.

Submitted to:
Teresita E. Crucero, B.S.C., M.B.A. (CPU), Ph.D. (IAME)
Professor

In partial fulfilment
Of the Course Requirements In
MBA 613- Financial Management

Submitted by:
Joynen A. Baldevarona

October 26, 2019

COMPANY PROFILE
1. San Miguel Brewery Inc. (SMB)

San Miguel Brewery Inc. (SMB) is the largest producer of beer in the Philippines,
with nine out of ten beer drinkers preferring its brands. San Miguel Beer was first
produced by La Fabrica de Cerveza de San Miguel, an upstart brewery in the heart of
Manila that began its operations in 1890. It received the Royal Grant from the Spanish
king to brew beer in the Philippines, then a colony of Spain. In 1963, the brewery was
renamed San Miguel Corp. (SMC) to reflect its growing ventures into food and
packaging. As the beer business grew at a steady pace, it provided the foundation from
which SMC expanded its interests from food, beverage and packaging, to power, oil,
airline and infrastructure. Today, SMC is the country's biggest diversified
conglomerate.
All SMB's beer operations were then under the San Miguel Beer Division, a
business unit of SMC. SMB was incorporated on July 26, 2007, and the domestic beer
business was spun off from SMC to SMB on October 1, 2007. The spin-off of SMC's
domestic beer business into SMB was intended to realize the value of SMC's flagship
business. In 2010, the acquisition of San Miguel Brewing International Limited (SMBIL)
enabled SMB to achieve full integration of its domestic and international beer
business. SMB is now at a greater advantage to champion the iconic San Miguel brand
across the Asia-Pacific region.
From a single product produced in a single brewery in 1890, SMB has developed
an array of popular beer products over the past century, catering to the distinct tastes
and preferences of beer drinkers across all segments and markets in the Philippines.
Today, it carries a portfolio of ten strong and popular beer brands: San Mig Light, Red
Horse Beer, Cerveza Negra, Gold Eagle Beer, San Miguel Strong Ice, San Miguel Super
Dry, San Miguel Premium All-Malt Beer, San Miguel Flavored Beer, San Mig Zero, and
its flagship brand, San Miguel Pale Pilsen. These products carry distinct attributes that
cater to all segments of the Philippine beer market and have earned international
recognition for quality, winning in the prestigious Monde International Selection
almost on an annual basis, among other awards and citations.
The Company has six production facilities strategically located across the
Philippines to ensure product availability and freshness,and a highly developed
distribution system serving approximately 471,000 retail outlets.
San Miguel Beer products have consistently dominated the market for beer in the
Philippines, the country's largest alcoholic beverage segment. Despite its dominant
market position, SMB continues to find new ways to grow further its volumes and its
market share in the Philippine beverage industry.
Source: www.sanmiguelbrewery.com.ph

2. Emperador Inc. (EMP)

Emperador Inc. (EMP) was originally incorporated on November 26, 2001 as

Touch Solutions, Inc. (TSI) with the primary purpose of establishing and operating
information technology services and products. On July 31, 2013, the Securities and
Exchange Commission approved the change in the Company's primary purpose to that
of a holding company. On September 5, 2013, the SEC approved the change in name
from TSI to the present one.
The Company is currently a holding company which operates an integrated
business of manufacturing, bottling and distributing distilled spirits and other
alcoholic beverages. EMP, through its subsidiary, Emperador Distiller's Inc., has a
product portfolio comprised of its own brands as well as licensed products, with an
international reach to at least 102 countries.
EMP offers an expanded array of liquor products through its acquisition and
partnerships with global manufacturers. These include United Kingdom-based Whyte
and Mackay Group, the fifth largest Scotch whisky manufacturer in the world; Bodegas
Fundador S.L.U in Spain, owner of the iconic brand Fundador; and Domecq Bodega Las
Copas, S.L which has an established presence in North and South America.
Among the Company's brands are Emperador Brandy; Emperador Light;
Emperador Deluxe Spanish Edition; Emperador Solera Brandy; Andy Player Whisky;
The BaR; Smirnoff Mule; The Dalmore Single Highland Malt; Jura Premium Single Malt;
Tamnavulin Single Malt Scotch Whisky; Fettercairn; Whyte & Mackay Blended Scotch
Whisky; Valdivar Vodka; Glayva; Claymore; Cluny; John Barr; Fundador; Terry
Centenario; Tres Cepas; and Harveys.
Source: SEC Form 17-A (2018)

FINANCIAL HIGHLIGHTS
 SAN MIGUEL BREWERY INC. AND SUBSIDIARIES
Horizontal Analysis of Comparative Income Statement
For Years ended December 31, 2018 and 2017
Increase/ Decrease (2018)
2018 2017 Amount Percentage
SALES/REVENUES ₱129,249,000,000 ₱113,255,000,000 ₱15,994,000,000 14.12%
COSTS AND EXPENSES ₱96,747,000,000 ₱84,911,000,000 ₱11,836,000,000 13.94%
PROFIT BEFORE TAX ₱33,720,000,000 ₱29,088,000,000 ₱4,632,000,000 15.92%
TAX EXPENSE ₱9,884,000,000 ₱8,377,000,000 ₱1,507,000,000 17.99%
NET PROFIT ₱23,836,000,000 ₱20,711,000,000 ₱3,125,000,000 15.09%
OTHER COMPREHENSIVE INCOME
₱1,232,000,000 ₱613,000,000 ₱619,000,000 100.98%
(LOSS)- Net of Tax
TOTAL COMPREHENSIVE INCOME ₱25,068,000,000 ₱21,324,000,000 ₱3,744,000,000 17.56%

EMPERADOR INC. AND SUBSIDIARIES

Horizontal Analysis of Comparative Income Statement
For Years ended December 31, 2018 and 2017
Increase/ Decrease (2018)
2018 2017 Amount Percentage
REVENUES ₱47,050,421,022 ₱42,655,527,544 ₱4,394,893,478 10.30%
COSTS AND EXPENSES ₱38,614,056,613 ₱34,820,155,522 ₱3,793,901,091 10.90%
PROFIT BEFORE TAX ₱8,436,364,409 ₱7,835,372,022 ₱600,992,387 7.67%
TAX EXPENSE ₱1,607,414,678 ₱1,503,052,461 ₱104,362,217 6.94%
NET PROFIT ₱6,828,949,731 ₱6,332,319,561 ₱496,630,170 7.84%
OTHER COMPREHENSIVE INCOME
₱63,067,839 ₱1,283,884,292 -₱1,220,816,453 -95.09%
(LOSS)- Net of Tax
TOTAL COMPREHENSIVE INCOME ₱6,892,017,570 ₱7,616,203,853 -₱724,186,283 -9.51%

Looking into the Sales/Revenues of both companies, San Miguel Brewery has
sold a lot with about 14.12% of increase from 2017’s total revenue attributed to their
high domestic sales and steady pace at the international market. Emperador Inc. also
increased by 10.30% in total revenues attributed to continuing sales growth from both
the Brandy and Scotch Whisky segments.
Both companies have higher operating expenses due to advertising and
promotions covering both domestic and international.
 FINANCIAL SOUNDNESS INDICATORS

SMB INC. EMP INC.

2018 2017 2018 2017
Current ratio 1.49 3.06 2.77 3.03
Quick ratio 1.21 2.74 1.3 1.48
Liabilities-to-equity ratio 0.76 0.8 0.92 0.91
Asset-to-equity ratio 1.76 1.8 1.92 1.91

Net profit margin 18.44% 18.29% 14.51% 14.85%

Return on assets 18.57% 18.95% 5.80% 5.68%
Return on equity/investment 36.82% 38.37% 11.13% 10.85%
Interest coverage ratio 17.68 15.3 11.41 8.85

Although San Miguel has higher revenue yields, when we try to look at both of
the companies in term of liquidity and solvency, Emperador Inc. has better numbers
compared to the former. Meaning, in terms of the ability to pay both short-term and
long-term debts, Emperador is doing slighty better than San Miguel.
However, in terms of the ability to generate earnings, San Miguel Brewery is
way ahead to Emperador, due to its wide market reach, diverse products and higher
sales.
SMB INC. EMP INC.
CASH FLOW 2018 2017 2018 2017
Net cash flows provided by operating activities ₱28,717,000,000 ₱26,601,000,000 ₱2,843,634,733 ₱2,404,213,895
Net cash flows used in investing activities (₱12,440,000,000) (₱6,047,000,000) (₱3,167,065,332) (₱8,214,882,745)
Net cash flows used in financing activities (₱12,138,000,000) (₱14,299,000,000) (₱3,610,753,357) ₱5,799,174,950

San Miguel, has more cash flows used in investing activities compared to
Emperador. One reason is During the year,SMB comple ted the installation of the
second bottling line in its Santa Rosa Plant, upgraded production facilities in all its
breweries, and expanded warehousing capacities in strategic locations.
Enhancements on quality and productivity were similarly implemented.

Consolidated Balance Sheet

 For the year ended December 31, 2018 & 2017

SMB INC. EMP INC.

2018 2017 2018 2017
ASSETS
Total Current Assets ₱48,826,000,000 ₱38,953,000,000 ₱56,000,020,273 ₱51,017,035,917
Total Non-Current Assets ₱79,546,000,000 ₱70,330,000,000 ₱61,818,351,409 ₱60,518,746,072
Total Assets ₱128,372,000,000 ₱109,283,000,000 ₱117,818,371,682 ₱111,535,781,989

LIABILITIES AND EQUITY

Total Current Liabilities ₱32,689,000,000 ₱12,717,000,000 ₱20,217,389,290 ₱16,837,376,359
Total Non-Current Liabilities ₱22,669,000,000 ₱35,782,000,000 ₱36,237,036,052 ₱36,344,851,985
Total Liabilities ₱55,358,000,000 ₱48,499,000,000 ₱56,454,425,342 ₱53,182,228,344

Equity Attributable to Equity

₱69,613,000,000 ₱57,501,000,000 ₱60,471,271,854 ₱57,718,896,695
Holders of the Company
Non-controlling Interests ₱3,401,000,000 ₱3,283,000,000 ₱892,674,486 ₱634,656,950
Total Equity ₱73,014,000,000 ₱60,784,000,000 ₱61,363,946,340 ₱58,353,553,645

Total Liabilities and Equity ₱128,372,000,000 ₱109,283,000,000 ₱117,818,371,682 ₱111,535,781,989

Despite being on the same industry and nature of business, as well their product
differentiation, In terms of assets and equity, San Miguel has higher figures compared
to Emperador but the latter having higher amount of liabilities since 2017 to date.
 SAN MIGUEL BREWERY INC. AND SUBSIDIARIES
Horizontal Analysis of Comparative Balance Sheets
For Years ended December 31, 2018 and 2017
Increase/ Decrease during 2018
2018 2017 Amount Percentage
ASSETS
Cash and Cash Equivalents ₱32,888,000,000 ₱28,297,000,000 ₱4,591,000,000 16.22%
Trade and other receivables - net ₱4,808,000,000 ₱4,995,000,000 -₱187,000,000 -3.74%
Inventories - net ₱9,156,000,000 ₱4,032,000,000 ₱5,124,000,000 127.08%
Prepaid expenses and other current assets ₱1,974,000,000 ₱1,629,000,000 ₱345,000,000 21.18%
Total Current Assets ₱48,826,000,000 ₱38,953,000,000 ₱9,873,000,000 25.35%

Noncurrent Assets
Investments ₱41,000,000 ₱41,000,000
Property, plant and equipment - net ₱22,251,000,000 ₱18,732,000,000 ₱3,519,000,000 18.79%
Investment property - net ₱1,340,000,000 ₱1,323,000,000 ₱17,000,000 1.28%
Intangible assets - net ₱37,005,000,000 ₱36,808,000,000 ₱197,000,000 0.54%
Deferred tax assets ₱1,092,000,000 ₱1,317,000,000 -₱225,000,000 -17.08%
Other noncurrent assets - net ₱17,817,000,000 ₱12,109,000,000 ₱5,708,000,000 47.14%
Total Noncurrent Assets ₱79,546,000,000 ₱70,330,000,000 ₱9,216,000,000 13.10%

Total Assets ₱128,372,000,000 ₱109,283,000,000 ₱19,089,000,000 17.47%

LIABILITIES AND EQUITY

Current Liabilities
Accounts payable and accrued expenses ₱15,622,000,000 ₱9,032,000,000 ₱6,590,000,000 72.96%
Income and other taxes payable ₱3,763,000,000 ₱3,685,000,000 ₱78,000,000 2.12%
Loan payable ₱500,000,000 - ₱500,000,000 -
Current maturities of long-term debt -net of debt issue
costs ₱12,804,000,000 - ₱12,804,000,000 -
Total Current Liabilities ₱32,689,000,000 ₱12,717,000,000 ₱19,972,000,000 157.05%

Noncurrent Liabilities
Long-term debt - net of debt issue costs ₱21,911,000,000 ₱34,665,000,000 -₱12,754,000,000 -36.79%
Deferred tax liabilities ₱29,000,000 ₱26,000,000 ₱3,000,000 11.54%
Other noncurrent liabilities ₱729,000,000 ₱1,091,000,000 -₱362,000,000 -33.18%
Total Noncurrent Liabilities ₱22,669,000,000 ₱35,782,000,000 -₱13,113,000,000 -36.65%

Total Liabilities ₱55,358,000,000 ₱48,499,000,000 ₱6,859,000,000 14.14%

Equity
Equity Attributable to Equity Holders of the Company ₱69,613,000,000 ₱57,501,000,000 ₱12,112,000,000 21.06%
Non-controlling Interests ₱3,401,000,000 ₱3,283,000,000 ₱118,000,000 3.59%
Total Equity ₱73,014,000,000 ₱60,784,000,000 ₱12,230,000,000 20.12%

Total Liabilities and Equity ₱128,372,000,000 ₱109,283,000,000 ₱19,089,000,000 17.47%

 EMPERADOR INC. AND SUBSIDIARIES
Horizontal Analysis of Comparative Balance Sheets
For Years ended December 31, 2018 and 2017
Increase/ Decrease during 2018
2018 2017 Amount Percentage
ASSETS
Cash and cash equivalents ₱6,228,229,892 ₱10,162,413,848 -₱3,934,183,956 -38.71%
Trade and other receivables ₱18,875,783,362 ₱14,694,733,441 ₱4,181,049,921 28.45%
Financial assets at fair value through profit or loss ₱1,208,707,500 ₱19,572,259 ₱1,189,135,241 6075.62%
Inventories - net ₱28,395,973,338 ₱25,186,966,124 ₱3,209,007,214 12.74%
Prepayments and other current assets ₱1,291,326,181 ₱953,350,245 ₱337,975,936 35.45%
Total Current Assets ₱56,000,020,273 ₱51,017,035,917 ₱4,982,984,356 9.77%

Noncurrent Assets
Investments ₱3,277,607,392 ₱3,233,944,765
Property, plant and equipment - net ₱27,247,873,634 ₱26,340,856,254 ₱907,017,380 3.44%
Intangible assets - net ₱30,229,975,679 ₱29,893,991,852 ₱335,983,827 1.12%
Other noncurrent assets - net ₱1,062,894,704 ₱1,049,953,201 ₱12,941,503 1.23%
Total Noncurrent Assets ₱61,818,351,409 ₱60,518,746,072 ₱1,299,605,337 2.15%

Total Assets ₱117,818,371,682 ₱111,535,781,989 ₱6,282,589,693 5.63%

LIABILITIES AND EQUITY

Current Liabilities
Interest-bearing loans ₱5,700,075,335 ₱4,161,326,840 ₱1,538,748,495 36.98%
Trade and other payables ₱13,235,235,723 ₱12,076,373,731 ₱1,158,861,992 9.60%
Financial liabilities at fair value through profit or loss ₱43,492,447 - ₱43,492,447 -
Income tax payable ₱1,238,585,785 ₱599,675,788 ₱638,909,997 106.54%
Total Current Liabilities ₱20,217,389,290 ₱16,837,376,359 ₱3,380,012,931 20.07%

Noncurrent Liabilities
Interest-bearing loans ₱28,314,724,893 ₱28,761,094,050 -₱446,369,157 -1.55%
Equity-linked debt securities ₱5,258,801,592 ₱5,227,114,518 ₱31,687,074 0.61%
Provisions ₱524,974,547 ₱443,245,445 ₱81,729,102 18.44%
Deferred tax liabilities - net ₱2,027,842,787 ₱1,797,284,641 ₱230,558,146 12.83%
Retirement benefit obligation ₱110,692,233 ₱116,113,331 -₱5,421,098 -4.67%
Total Noncurrent Liabilities ₱36,237,036,052 ₱36,344,851,985 -₱107,815,933 -0.30%

Total Liabilities ₱56,454,425,342 ₱53,182,228,344 ₱3,272,196,998 6.15%

Equity
Equity Attributable to Equity Holders of the Company ₱60,471,271,854 ₱57,718,896,695 ₱2,752,375,159 4.77%
Non-controlling Interests ₱892,674,486 ₱634,656,950 ₱258,017,536 40.65%
Total Equity ₱61,363,946,340 ₱58,353,553,645 ₱3,010,392,695 5.16%

Total Liabilities and Equity ₱117,818,371,682 ₱111,535,781,989 ₱6,282,589,693 5.63%

For Emperador Inc., its Cash and cash equivalents were depleted by about 38.7% or
P3,934 million mainly from the parent’s dividend payment (P2,399 million) and
purchase of treasury shares (P1,529 million) during the year. Also, the Inventories
expanded by 12.7% or P3,209 million, primarily due to additional cased stocks from
the new products and the fillings of Scotch whisky due to high product demand.
 EXHIBITS
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